Weekend Review of Volatility Indexes and ETPs - 2/13 - 2/17

VXST and VIX managed gains last week while the longer dated volatility indexes (VXV and VXMT) both lost value. The curve created by charting out VXST, VIX, VXV, and VXMT has been steep for most of 2017 as the shorter dated indexes have been at very low levels. The price action last week narrowed the angle to more normal levels.

Last week the S&P 500 was up just over 1.5% and VIX rose over 5%. More on that after the table below.

I ran some numbers and this is on the 14th time since 1990 we have had both rise by this amount. The previous 13 had mixed results the following week. Honestly, I was hoping for something more significant. I guess for now it's back to crunching numbers for me.

SVXY is now up over 40% for 2017, VXX has dropped over 30% and the leveraged UVXY has given up over 50% this year.

In addition to VXST and VIX there were a handful of other volatility indexes that rose last week. However, it was a mix of indexes that rose, EuroCurrency, AAPL, AMZN, and Brazil for example with no real pattern among the leaders.

The low for VXX this past week came around the open Wednesday as the long VIX focused ETN was trading around 16.80 to start the day. One astute and large trader came into the market buying a few thousand VXX Feb 17th 17.00 Calls for 0.20 and selling an equal number of the VXX Feb 17th 17.50 Calls for 0.09 and a net cost of 0.11. I liked this trade for two reasons, first we can see how the trade worked out since those options expired on Friday. Second, because we get to see an example where getting long exposure to VXX works.

I highlight where VXX was when the trade was executed and Friday’s close. This trade is a perfect example of a strategic option trade that worked out as well as it was drawn up.

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